4 Steps Trading.
4- Step Trading Strategy:1) Entry: You decide to buy.
2) Initial Stop: As soon as you have entered the stock, you must immediately establish the point at which the issue will be eliminated, should the trade go south. This sell point is commonly referred to as a stoploss. When using this approach, your stop loss will be set directly below the previous day's low. Most successful short term trades do not fall back below the lowest price of the previous day. This makes this point very critical.
3) Adjust Stop: Assuming the trade is not stopped out by the end of the day, the issue is held into the next day. On the 2nd day, prior to the market's open, you will adjust (raise) your stop loss to the lowest price of the entry day. For instance, let us say that you have successfully entered a stock on day one at a price of $2.50. Your initial stop was not triggered so you will now be going into the 2nd day of the trade. However, before the market opens, you will have to determine what the lowest price of the first day was. For the sake of simplicity, lets assume this was $2.38. You would then call your broker to place a stop loss order at $2.38. If your broker cant take stop loss orders, than you would have to carefully watch that price, and sell on any violation of it. This will help curtail the losers.
4) Sell. Once we are into the 2nd day of the trade, and our adjusted stop has been set(actually or mentally), we are ready to concentrate on selling as the stock continues its move forward. Sell on the our objective will be today the stock moves above the high price of the entry day (the1st day). This will typically occur on the 2nd or 3rd day; but please note that this will not always be the case. At times you may have to wait four or five days for the 1st day's high to be exceeded. Of course there will be times when not the stock will rise above the highest price of the entry day.
Rather it will fall back, setting off the adjusted stop you placed on day number 2. In these cases, you will be stopped out for a small loss. However, the point which must be remembered is this: held, day after day, until either the high price of the entry day is exceeded to the upside, or the low price of the entry day is exceeded to the downside. Both sell scenarios (profit or loss) will Day of Entry hinge on the critical. The above example should make this perfectly clear.
Now it should be noted that at times this strategy will have you selling for very meager profits of $0.50 or less. But do not scoff at these tiny gains. While the majority of traders will be taking $0.50 to $1.00 losses, due to a difficult trading environment, you will be nickel and dime-ing the market to profit. Of course you will have your share of $1 to $2 runs as well.Try it!
Dear Sir;
I visit your blog today, but couldn't find any buying clue?any recommendation /tips next week ?
Thanks;
chan k2
Posted by
Anonymous |
5:37 pm
Would u rather get the fish or learn how to fish? ..
Posted by
Anonymous |
9:33 am
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